Nauman Khan
This article first appeared on GuruFocus.
Bank of America strategists urged caution on equities through mid-November, warning U.S. stocks may have further to fall before a durable floor emerges.
Michael Hartnett’s team said markets need to account for political risks and show signs that major cloud and artificial intelligence companies are nearing a peak in investment spending. Rising financing costs could force spending cuts and pressure stock valuations.
The warning comes as the S&P 500 fell 1.2% and the Nasdaq Composite dropped 2.6% in Thursday trading. Looking toward 2027, the bank outlined three paths: an AI bubble, a broader rally across sectors, or a deflationary downturn. Strategists said investors appear too confident in the first two and insufficiently prepared for a deeper slowdown.
Flows into technology funds reached $18.8 billion in the latest week, the largest inflow since July, while consumer funds lost $2.1 billion. Bank of America’s Bull & Bear Indicator slipped to 7.2 from 7.4, retreating from extreme bullish readings seen over the summer. The team said a better buying opportunity may emerge when fear rises and policymakers ease financial conditions.
